Abstract

The paper examines the impact of auditor reputation (i.e. size of audit firm) on auditor
independence. Questionnaires and interview survey were used to seek the perceptions
of senior managers of Malaysian audit firms, banks and public listed companies.
Consistent with the documented evidence, the Big Four firms were perceived to be
superior compared to the non-Big Four firms in all aspects relating to independence
from their clients. Respondents indicated that Big Four auditors are better able to
resist management pressure in conflict situations, are more effective at detecting
activities that will affect clients’ company continuity, are more risk averse and thus
more disinclined to be associated with public scandals and/or audit failures, are more
risk averse with regard to litigation arising from fraud/misstatement/ irregularities and
are more independent than non-Big Four auditors. It may be that the Big Four auditors
are more exposed and subject to close scrutiny by the public and regulators, especially
when negative behaviour is perceived. The findings suggest that the Big Four auditors
are perceived to be more independently than the non-Big Four auditors.